Crisis management has long been a back-burner business tactic, a reactive strategy that every company knows it needs but hopes it never has to implement ... and is usually ill-equipped to execute when that time comes.
"Most companies are in chaos when a crisis hits," says Gene Grabowski, senior vice president of Levick Strategic Communications LLC, a crisis management consulting firm in Washington. "Very few are prepared."
That's slowly changing, he says, as businesses of all types and sizes realize the number, strength, and swiftness of potential threats to a company's reputation, operation, and profitability. "We've redefined it as 'high-stakes' management," says Grabowski, expanding the term beyond natural disasters, terrorist bombings, and criminal investigations to include Internet attacks, product recalls, and defect litigation among the issues that can put a business in peril.
Bodyguard the Brand The combination of heightened national and personal security fears after 9/11, stricter federal regulations after the Arthur Andersen and Enron accounting scandals earlier this decade, and the expanding use of the Internet as a public forum have driven more businesses to implement aggressive crisis management strategies.
To "bodyguard the brand" against those high-stakes hurdles, Grabowski advocates a dedicated effort to search and monitor Internet blogs to find out what people are saying about a company, and what journalists covering a particular industry might use as fodder for an article. "If someone wants to attack your reputation and brand these days, that's how they'll do it," he says.
Grabowski points to Southwest Airlines as a company that understands new-age risks and takes a proactive approach to high-stakes management.
"They get out ahead of the bloggers, understand their customer base, and build alliances" with the media, he says. "When people hear bad things about Southwest, they say 'That doesn't sound like the Southwest Airlines I know,' and that's exactly what you want."
There are also the traditional crises, such as a hurricanes or wildfires. In those cases, just keeping the doors open through recovery is the goal. "It's difficult not to have a break in the process" when such disasters occur, says Jan Decker, president of Crisis Management Consulting in Sumner, Wash., near Seattle. "The goal is to get [the business] going as soon as possible."
LBM suppliers, says Decker, also are critical cogs in any response and rebuilding effort after a natural disaster hits. As such, lumberyards and building materials outlets must be ready to open their doors once the danger passes to both assist in rebuilding and maintain the business once the short-term need is met and normalcy returns. "If you can't deliver your products and services in an urgent situation, you'll likely suffer permanent loss," says Decker, referring to customers who must turn to other suppliers that are better prepared to respond, and then stay there.
Decker advocates having contingencies in place to meet short-term responsibilities and protect business relationships, especially those outside an affected area who may be less sympathetic or flexible. "Have partnerships established with other suppliers, even competitors, to make sure shipments go out on time," she says.
Just as important, Decker encourages dealers to have backup plans in place to meet immediate financial responsibilities, namely payroll and accounts payable when a crisis threatens cash flow. "Transfer the risk to an insurance policy or build it into a line of credit," she says, noting that the time to get those ducks in a row is before a crisis, not the day after. That type of crisis planning, says Decker, is one reason why an increasing number of small-business owners are outsourcing payroll functions, offering direct deposit payments to employees, and implementing automatic and electronic payments to vendors.
Power of the Press
In perhaps the most famous example of what not to do in a crisis, executives at Exxon Mobil Corp. made critical errors in the company's response to the Exxon Valdez oil spill in Prince William Sound, Alaska, in 1989, from which the energy giant has never fully recovered. Exxon Mobil's response to the spill was not only too little, too late, but included a hesitancy (some say refusal) to communicate internally and with the public. Remarkably, Exxon Mobil's then-chairman Lawrence Rawl blamed the media for the crisis, a critical error then and one that builders and the supply chain have often made during the housing and economic crisis.
Like getting a line of credit or business insurance to cover short-term financial needs, cultivating the local media and understanding today's electronic news-gathering methods–again, often through blogs–will at least help nurture balanced coverage, says Grabowski. "You can't call up a reporter you've never met when you're in trouble, and then get upset when he doesn't print what you want," he says.
Formulate a Plan
Whether protecting profits and reputation or ensuring business continuity through any sort of modern-day crisis, both Grabowski and Decker acknowledge that the key is to have a plan. "Crisis craves a structure," says Grabowski.
A crisis or high-stakes management plan, he says, should be unique to each company and possible scenarios, but its overriding goal is to buy time. "Time is your enemy in a crisis," Grabowski says. "The key to managing and perhaps prevailing over a crisis is to have the smartest people in the room, with time to think and act."
Grabowski also suggests that a business designate one person, not a committee, to oversee and update the plan. "If no one is solely responsible or considered the in-house expert, the plan will be more difficult to create and implement," he says.
The supply chain, says Decker, is a prime example of how a crisis, namely a natural disaster, can cause a domino effect, touching the operation and profitability of several businesses beyond those the event affects most.
"It puts everyone at risk when one of those businesses isn't prepared" to handle a crisis, she says.